3.7 ANALYSING THE STRATEGIC POSITION OF A BUSINESS Flashcards
Define Assets
What the business OWNS
Define Liabilities
What the business OWES
Define Non-current Assets
Assets that provide a benefit for the business in the long-term (Over a year)
Give an example of non-current assets
Buildings and machinery
Define Current Assets
Assets that will be used up or sold in the short-term and the cash balances kept within the business
LESS THAN A YEAR / WITHIN A YEAR
Give an example of current assets
Raw materials
Define Current Liabilities
What the business owes in the short-term
LESS THAN A YEAR / WITHIN A YEAR
Give an example of current liabilities
Short-term debts
Define Non-current Liabilities
What the business owes in the long-term
MORE THAN A YEAR
Give an example of non-current liabilities
Long-term debts
Define Working Capital
Cash available to pay short term debts/liabilities
Equation for Working Capital
Current Assets - Current Liabilities
Define Net Assets
Value of assets overall
Equation for Net Assets
Net Current Assets + Non-current Assets - Long-term liabilities
What is Net Assets equal to?
Capital Employed
Define Capital Employed
Amount of long-term money put into a business
Define strategy and tactics
Strategy: how we do things, medium/long term plan of action, put in place to achieve a business objective.
Tactics: short term that helps to achieve a strategy- daily activities such as sending emails
Influences on the mission of a business
- Size
- What its about
- Target market
- £££
- Owners
- PESTLE (external factors)
Internal influences on Corporate Objectives
- Business ownership
- Attitude to profit
- Ethical stance
- Organisational culture
- Leadership
- Stakeholder influence
External influences on Corporate Objectives
- Economic environment
- Political / legal environment
- Competitors
- Social and technological changes
Define Strategic Position
Concerned with the way in which a business as a whole distinguishes itself in a valuable way from its competitors
A firm’s decisions on how to serve customers and compete against rivals
Define ‘short-termism’
- For survival
- Up to 1 year
- An excessive focus on short-term results
Disadvantage of ‘short-termism’
- Can mean forget about long term measures and not focus on them
Why may a business be concerned about the short term?
- Stock market actions
- Reliance on bonuses based on short-term performance
- Changes in leadership and strategy
Give a contextual example of a business that has a long-term perspective
Unilever - doesn’t publish data to analysts and media
How would you evaluate the ROCE of a business?
The higher the percentage figure, the better.
Compare with the ROCE from previous years to see if there is a trend of ROCE rising or falling.
Based on snapshot of business’ balance sheet
What does ‘return on capital’ tell us?
- Measure of return
- How good a business is at converting money invested to profit
- Provides way of comparison
- Speculate opportunity cost - what a business could have done if they invested elsewhere
Mention if internal or external
What does ‘SWOT’ stand for?
Strengths (Internal)
Weaknesses (Internal)
Opportunities (External)
Threats (External)
Define ‘SWOT’ analysis
Method for analysing a business, its resources and its environment.
Focuses on the internal strengths and weaknesses of a business (compared with competitors) and the key external opportunities and threats for the business.
What does ‘SWOT’ aim to cover?
- What the business does better than the competition
- What competitors do better
- Whether it is making the most of the opportunities available
- How a business should respond to changes in its external environment
Mention examples of strengths of a business
(SWOT)
- Reputation for high quality products
- Seen as innovative
- Very profitable in comparison to other organisations
Mention examples of weaknesses of a business
(SWOT)
- Reputation as poor employer
- Product portfolio full of declining products
- High levels of staff turnover / absenteeism
Mention examples of opportunities of a business
(SWOT)
- Main competitor having financial difficulties
- Government encouraging more spending
- Fall in exchange rates, helping exporters
Mention examples of threats of a business
(SWOT)
- High levels of competition in a market
- Innovation / USP from competitors
- Increased interest rates
- Products becoming obsolete
Define ‘opportunities’
(SWOT)
What a business can take advantage of
Give examples of an internal strategy (method of achieving a goal or target)
- Delayering
- Expansion
- Retrenchment
Give examples of an external strategy (achieving a goal or target)
- Analysing trends
- Being aware of laws
- Being aware of technical advances
- Viewing economic conditions
Define an ‘incremental strategy’
Bit by bit
Give examples of an incremental strategy (achieving a goal or target)
- Kaizen
- Lean production
- Streamlining: improvement of the efficiency of a certain process
Give examples of a disruptive strategy (achieving a goal or target)
- Adapting to digitalisation: modern world
- Adjusting to Covid-19
- Becoming more environmentally friendly to ward off pressure groups